ADM rationalises oil operations

- Last updated on GMT

Related tags: Trans fat

US giant processor Archer Daniels Midland (ADM) and currently the
world's number three food group will ramp up production capacity at
four of its key processing plants at the company's North American
Oilseed division.

Without further details, the €24.8 billion firm said the planned expansion - earmarked for completion by September 2005 - is part of an ongoing 'rationalisation' strategy that includes re-deploying capacity to key facilities.

Plants tipped for expansion include Mankato, Minnesota, Des Moines, Iowa, Lincoln, Nebraska and Enderlin, North Dakota.

ADM, one of the world's largest processors of soybeans, corn and wheat is currently working amid soaring prices for these raw materials. Poor global harvests in the last twelve months plugged together with increasing demand from China have squeezed the price for the major food commodities. Moving up the food chain, higher prices for the source have impacted food ingredients suppliers and their food maker clients.

But according to investment bank Goldman Sachs, the volatility is slated to continue, marked in particular by uncertainty over Chinese imports that is exacerbating the seasonal volatility normally associated with planting and growing seasons. "With stocks at minimal levels any positive demand or negative supply shocks will likely require price spikes to ration demand,"​ said the bank in report issued earlier this month.

While tightness in soybean stocks is slated to begin to ease in the US, the increased supply will not be available until late this year, leaving soybean prices, like corn and wheat, vulnerable to supply shocks, added the bank.

Soy price volatility tends to rise starting in June, which is the middle of the planting season in the US, and then peaks in August towards the end of the flowering season, dropping in October and November when harvest progresses.

Weather conditions across the globe in the past two years have also had a major impact on wheat production. In 2003, final harvest figures for Europe and Russia came in 50 million tonnes lower than expected. And despite a 40 million tonnes lift from the US - the world's biggest exporter - as well as Canada and Australia, global yields of 552 million tonnes for 2003 fell short on demand, sending wheat prices high.

Last week ADM said it had stepped up production of its trans-fat alternatives driven by increasing market demand - and before new labelling rules come into force in the US in January 2006.

The processor said it would expand its NovaLipid line of zero/low trans-fat oils and margarines at its Quincy, Illinois enzyme inter-esterification facility over the next year. >

According to the Illinois-based firm, the facility is the first commercial enzyme inter-esterification facility in North America.

Trans fatty acids (TFAs) are formed when liquid vegetable oils go through a chemical process called hydrogenation. Common in a range of food products - biscuits, chips, doughnuts, crackers - the hydrogenated vegetable fat is used by food processors because it is solid at room temperature and has a longer shelf life.

But research suggests that trans fats raise LDL (bad) cholesterol levels, causing the arteries to become more rigid and clogged. An increase in LDL cholesterol levels can lead to heart disease. As a result, the food industry is gradually slicing out their use as more consumers look for alternatives.

Related topics: Market Trends, Fats & oils

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